Centre decides to look at hedging risks after RBI’s suggestions

Following Reserve Bank of India’s repeated suggestions to Indian companies to hedge their foreign currency loans, the Centre has decided to look at hedging risks as it is planning to raise Rs 1 lakh crore in dollars for the port sector. The information was given out by Union minister for Shipping and Ports Nitin Gadkari.

“I am unable to solve one problem, how to do hedging for this money?” Gadkari said while speaking at an industry meet in Mumbai.

Reiterating that there are benefits by way of interest cost reductions if money is raised in foreign currency, Gadkari said “hedging is necessary as if anything goes wrong in the future, he will be blamed”.

Gadkari has for the time being suggested ‘dollarisation’ as an alternative and called up ICICI Bank’s managing director and chief executive Chanda Kochhar, and convinced her to charge a lower rate of Libor plus 0.5%. This comes to 3-3.5%, which is a lot lower than the 12% rupee funding alternative.